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News Article

Tangible Investment Sees Worst 1Q in a Decade

By Antonio Gozain | Tue, 05/24/2022 - 08:00

Resources allocated to tangible investment during 1Q22 registered the biggest drop for a quarter since 2019, with an 8 percent decrease year-on-year, according to the Ministry of Finance (SHCP). The investment amounted to MX$152.5 billion (US$7.6 billion), the lowest record of the past 10 years, reported El Economista.

“The annual investment planned for 2022 was MX$874 billion (US$43.7 billion), the largest amount since 2016. The reality is that investment decreased by 8 percent in 1Q22, reaching only US$7.6 billion, the worst figure recorded in a decade. At the time, we estimated that the government’s investment was very ambitious, as well as its income expectations,” reads an analysis by México Evalúa.

The approved budget for 2022, according to the Federation Expenditure Budget (PEF), amounted to MX$982.2 billion (US$49.1 billion), 14.3 percent above 2021’s budget. From the total resources, 87.9 percent are to be destined to tangible investment, 10.9 percent to financial investment and 1.2 percent to subsidize the social sector, states and municipalities.

Tangible investment refers to the resources destined to the acquisition of tangible, hard or real assets, such as buildings, furniture, equipment, computer systems, vehicles, transportation equipment, among others, as well as public works and other development projects. Financial investments, on the other hand, refer to stocks, bonds, mutual funds, among other financial instruments.

Resources allocated to tangible investments are crucial for Mexico’s development, as they create jobs and wellness to the population, said Gabriela Siller, Director of Economic and Financial Analysis, Banco Base. Tangible investment is even more important now than ever following the economic crisis caused by the pandemic, she added.

In 1Q22, tangible investment saw its biggest drop in government operation infrastructure, which represents only 2.3 of total spending on infrastructure. Investment amounted to MX$3.6 billion (US$180 million) in this area, 77.4 percent less than 1Q21, according to SHCP. The largest boost to tangible investment happened within science, technology and innovation infrastructure, which increased by 447 percent. In addition, the justice system infrastructure expenditure saw a 101.4 percent increase.

Tangible investment in social development, which includes healthcare infrastructure, housing, environmental protection, education among other social issues, increased by 2.8 percent in 1Q22, compared with 1Q22. Social development represented 40 percent of the total tangible investment in 1Q22. Within this category, investment in recreation and culture infrastructure saw the largest increase, at a 209.3 percent rate.

The data used in this article was sourced from:  
MBN, SHCP, El Economista
Photo by:   Unsplash
Antonio Gozain Antonio Gozain Journalist and Industry Analyst